Safety Stock Calculator

Safety Stock Calculator

When you run with out-of-stock products you lose revenue from having too little inventory, and you can also damage customer loyalty. A customer will go elsewhere to find the item, but as a result, they may never return to your business for that product or any other. Out-of-stock products reduce the overall efficiency of the supply chain. There are times when running low on stock levels is inevitable, but it shouldn't be so often that it disrupts or endangers your business. Understanding how to calculate safety stock will help you avoid this situation.

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What is Safety Stock?

Safety stock is extra inventory. It is inventory that a business holds to reduce the risk of out-of-stock products that fluctuating supply and demand create. Healthy safety stock levels help you avoid unpredictable surges, whether it is the result of inclement weather or a sudden trend. 

You can track these things to the best of your ability, but business is wildly unpredictable. You can opt for back ordering to try and offset these issues, but this isn't a sufficient response for many businesses. Safety stock is the perfect solution, without increasing your carrying costs too much. That is if you know how to properly manage stock calculations. 

Read More: What is Safety Stock? Meaning & Formula

How To Calculate Safety Stock

To work out your safety stock calculation, you first need the formula.

(MDU x MLT) – (ADU x ALT)
Maximum daily usage x maximum lead time
Average daily usage x average lead time (in days)
Subtract the average from the maximum for your safety stock calculation.

Calculating safety stock is not that difficult, but it is even easier if you use the safety stock calculator. As with any calculation, it's important that you use the correct figures. 

How To Use The Safety Stock Calculator

To use the safety stock calculator you need four figures. You need to know your maximum daily usage, maximum lead time, average daily usage, and average lead time. This calculates the average demand so you can cover outages without holding too much stock. Once you have those four figures you just need to enter them into the corresponding fields and the calculator will do the rest.

How QuickBooks can help

Good inventory management is the key to ensuring that your business does not run out of product at inopportune moments. QuickBooks Inventory Management software will help your business stay on top of your inventory with features like: real-time stock value tracking, low stock alerts, order tracking and more. Visit our pricing page to find a plan that is right for your business or to get a free 30-day trial.

Visit our free tools and templates hub to find more free assets that can help you run and grow your business. 

Frequently Asked Questions

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